December 2013 Debt Repayment Update and Financial Goals for 2014

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Well, I’m not quite as excited about writing this debt update post as I have been in previous months because December was one of our worst months for making extra debt repayments.

It was Christmas after all and with Christmas comes expense in one form or another. I took a long break from work which meant I didn’t get paid for a couple of weeks as I’m self employed and then there were Christmas pressies to buy – not that we spent too much on that side of it!

Despite our low debt repayment numbers, this is still a positive update post for us! Because both the hubby and I are pleased and relieved to have survived the festive season without having to resort to credit in any way and even had a little cash left over in our bank account. Yep – actually in the black instead of the red. That isn’t something we’ve experienced very often after Christmas!

We didn’t actually make any over payments at all in December, just a minimum payment of £247.50. This brings our debt total to £33,490.39 down from £33,737.89 in November.

Back in November, we had an awesome month for debt repayment and finally managed to clear that pesky credit card of mine that had been hanging around for the last 10 years or so. With this card gone, we now have a little spare cash each month which will be able to go towards paying off the rest of our debt along with any other money we can save or make along the way.

The plan of attack for 2014

The rest of our debt is made up of four credit cards and a bank loan. We ran into some serious trouble with these debts a couple of years ago and had no choice but to enter into a debt management plan.

This meant that the minimum repayments for each of these debts was (and still are) reduced by our creditors to a more manageable single monthly payment to a debt management agency who then distributes the payments on our behalf.

It was a pretty low point for us when things got to this stage and we needed help sorting out this arrangement so badly to take the pressure off a little. Getting scary letters from creditors every couple of days takes it toll on anyone!

There are pros and cons to entering into a debt management plan. The main positive points about doing this means that it provides valuable breathing space to get a grip on your finances and it’s also a good alternative to bankruptcy. The cons involve your credit rating taking a huge hit and it can take an awfully long time to pay back the debt in full if you only make the reduced payments.

Because we had no idea what we were doing back then, we signed up to a debt management agency which charges us a handling fee each month. We now know that there are debt management charities out there in the UK who don’t charge a fee (namely Step Change and National Debtline) and we looked at moving to them last year. However these charities wanted us to go down the route of an Individual Voluntary Arrangement (IVA) because of the extent of our debt which we didn’t want to do, so we stuck with our existing debt management plan provider. They took a lot of the stress out of being chased by creditors and for that we’re grateful.

But now we’re back in the driving seat with our finances, we intend to take over the debt management plan ourselves over the next couple of months and therefore get rid of this monthly fee which will leave us with more spare cash to put towards our debt.

So with some changes in mind, we think the best way forward is to save up spare cash at the moment until all the paperwork gets sorted out. Then we can attack our debts with whatever we’ve saved as well as increasing our regular monthly payment to what we can now afford.

We’ve set up a separate savings account and any extra money will go in there. As of the end of December, we have a total of £280 to go towards debts. This month, we have a lot of bills to pay out for (not unexpected) but we’re hoping to save a similar amount again. Watch this space!

Our ultimate financial goals for 2014

Last year, we surpassed ourselves by paying off my credit card against the odds. It’s amazing how setting goals can really help motivate and inspire us. So in 2014, we have two major goals that we’re working towards:

Reduce our debt down to £20K from just over £33K now.

Save more for retirement.

Reducing our debt down to £20K would be pretty awesome and we’d be halfway there to achieving debt freedom! (Consumer debt at least). This means we’ll have to save and make a LOT of extra money this year. We’re not sure yet how we’ll do this exactly but we want to take on more side hustles, save more on our basic expenditure and keep on selling anything that we can do without. We will be trying our hardest to make this happen!

Our only retirement fund is tied up in a rental property (which is mortgaged) and we’ve yet to see a return on our investment. It’s a long term plan but even so, the property isn’t worth a fortune so we don’t expect too much from it.

We need to be thinking of other ways to save for retirement too – tricky considering our priority is debt payoff. But we need to think of our future selves more than ever so this also needs to be a priority even if we can’t spare much money for this at the moment.

Comments

Hayley, you guys are doing awesome!!! You’ve dropped a lot of debt this year, and you paid cash for your Christmas stuff – two great accomplishments!! We have several different goals for this year, but man, would I love to get totally rid of our credit card debt.Laurie @thefrugalfarmer recently posted…Work From Home or Stay at Home: How to Balance the Tasks

That’s awesome that you guys will be taking over managing your debt and eliminating the fee you’re paying. I’m sure you’ll do great. I would love to be able to put $10,000 toward my student loans this year. They’re definitely my focus for 2014.E.M. recently posted…An Expense Comparison Case Study

I think December is always a tough month for a lot of people! My financial goals are trying to catch up with some retirement swings, and hopefully just breathe a little easier! Good luck with your goals!Budget and the Beach recently posted…Adventures Around the World: Life as a Travel Club Organizer

I think you guys did awesome in 2013! December is always going to be hard but you’ve made huge changes, didn’t overspend and didn’t add to your debt. I think that’s a great accomplishment!

For me, my biggest goal for 2014 to pay off the remaning debt ($2500) and then to stay out of debt for the rest of the year (preferably the rest of my life) other than the mortgage. I would also like to save at least 30% of my income.

I love the snowball method because it frees up more cash every time you pay off a debt. Congrats on getting rid of that one credit card debt, and on getting back in the driver’s seat on your debt payoff. Let us know how your progress goes in 2014!Done by Forty recently posted…What’s it Like in America?

I think it’s time for you and your hubby to get back into the driving seat of your debt too! Like you, before this Christmas, I had always finished December in the red but this year it feels so nice to finish in the black and stay within my budget! Funny what a difference just one year makes! Girl Meets Debt recently posted…Ask the Reader: If You Weren’t a Personal Finance Blogger…

December was so slow for me regarding side hustle income. I also spent a lot too and “only” put $900 compared to my usually 1k+. I know you can take control and make your goals happen. I’m right there with you! Happy New Year by the way and hopefully you had a nice holiday.Dear Debt recently posted…The Affair is Over

Thanks so much Charles. Happy New Year to you and your wife. I hope I can work out a balance of saving for retirement and paying off debt. I’ve been researching how much I should be putting aside today and the figures are making me panic slightly! I know it’s really important though.

You’ve come along with Hayley and it’s great that you and your husband are ready to take charge of your debt and handle it yourself. You have an aggressive goal but it’s very clear that you and your husband are willing to do the work to achieve it as well. Here’s to a great 2014 and lots of debt repayments!Shannon @ The Heavy Purse recently posted…4 Smart Financial Moves to Start the New Year

I realize it’s a long, sometimes frustrating endeavor, but it looks like you and your hubby are hunkered down for the long haul

I too want to save money this year and will attempt to live with more frugal intentions than I have in the recent past. I’m actually looking towards how much fun I’ll have trying to challenge myself to spend less.

Take care Hayley and congrats again on your debt chiseling prowess…just imagine where you’ll be this time next year

Hi Lyle! Happy New Year to you. Thanks for your kind words and I look forward to reading about your frugal intentions throughout the year! What I love most about this PF blogging community is the great attitude everyone has to making saving money exciting and not depressing. I also look forward to challenging myself to spend less too!